IMF looks to expand special drawing rights

The International Monetary Fund is exploring ways to broaden the use of its special drawing rights after G20 leaders reached a consensus to enhance the resilience of the international financial system.

"The IMF was really encouraged by the determination of China to use the SDR as a yardstick to measure reserves and as a currency for bond issuance," Christine Lagarde, its managing director, said on Sept 5.

The call for greater use of SDR, a synthetic reserve currency, has been strongly backed by China as the country works to lift the global profile of its currency. The renminbi will be included in the IMF's reserve currency basket on Oct 1.

Lagarde says the IMF will continue to expand the representation of emerging and developing economies in the organization, as it needs to serve the entire membership.

She also reiterates that the renminbi meets the criteria for inclusion in the SDR as the Chinese monetary authority has made "constructive progress" by making its monetary policy more market-determined.

Experts say the expansion of the use of the SDR will help improve the stability of the global financial system and the inclusion of the Chinese currency will in turn empower the influence of the SDR in international markets.

"The yuan's inclusion in the SDR will, to some extent, increase the influence of the SDR and enable it to play a greater role in the international financial markets," says E Zhihuan at Renmin University's China's International Monetary Institute.

The World Bank recently issued a landmark bond denominated in the SDR in the Chinese interbank market.

Jim Yong Kim, the bank's president, said earlier that the issuance of SDR bonds in China would support the expansion of the use of SDR, one of the G20's key financial tasks.

Lagarde says the G20 leaders endorsed several initiatives to support stability and resilience of the international financial architecture, which included support for further strengthening of the global financial safety net with an adequately financed IMF equipped with a more effective toolkit.

"Global financial governance has been a big topic. After the January surge in market volatility, cooperation between countries has improved greatly, and the G20 has been a suitable venue to cement the ties in that regard," says Hong Hao, chief strategist at BOCOM International Holdings in Hong Kong.

Chen Yingqun contributed to this story.

lixiang@chinadaily.com.cn

(China Daily European Weekly 09/09/2016 page15)